David Pitt-Watson, the co-chair of the UN Environment Programme Finance Initiative, believes there is now real momentum behind creating a truly sustainable financial system – as shown by UNEP’s Inquiry launched today (see separate story) – and the fact that the issue is now very much on the policy agenda.
He was speaking as the findings of an almost two-year Inquiry into a Sustainable Financial System were being presented at the very highest level at the World Bank/International Monetary Fund meetings in Lima, Peru.
Pitt-Watson, the former Hermes executive who is now Executive Fellow at London Business School, cited Bank of England Governor Mark Carney’s high profile remarks about the impact of climate change as evidence that the issue has now moved on from investors into the realms of regulators. He explained that no-one has ever looked so systematically at the financial system before, and that Inquiry authors Simon Zadek and Nick Robins have been able to show how much is actually happening around the world already – providing a framework or precedent for others to follow. “Nick and Simon show that this is not unexplored territory,” he said, citing examples of how China is leading the way in some aspects of regulator policy.“The goal,” he says, “is to make the financial system as efficient as it can possibly be.”
He picked up on Bloomberg New Energy Finance’s description as the way capital markets work as being “institutionally fossilist” in that they by default prefer unsustainable over sustainable investment. With the likes of Carney and the IMF’s Christine Lagarde now engaged in the topic, Pitt-Watson told Responsible Investor: “I have a sense there’s a momentum building in all this.”
Regulators were now able to take the cue from the financial industry, which is greener than its sometimes ‘red in tooth and claw’ reputation.
He said the report provides a framework for how sustainable financial regulation could look, and used the example of the Dutch central bank as a sustainably focused overseer. For him, it’s no surprise that Dutch pension funds are so progressive, given that De Nederlandsche Bank is also the pension regulator. “Sustainability needs to be seen as central to your remit as a regulator.”
He told RI the Inquiry is formally funded until mid-2016 and will aim to develop tailored plans for specific countries.